Ch.10 Collections, Disbursements and Concentration

Question 1

What are the different categories of wire transfers?

Answer 1

Semi repetitive wires - basically using a template but changing invoice numbers
Non Repetitive - Free form, most risky
Drawdown - reverse wire
Standing Wire - automatic wire transfer when a threshold is surpassed. Like a sweep

Question 2

Integrated or comprehensive accounts payable

Answer 2

Outsourcing all or a portion of payables with data files

Question 3

ARP

Answer 3

Account Reconciliation Program
- Bank issues report to reconcile paid items that interface with the companies ERP system. Can be fully integrated files going both directions.

Question 4

Major advantages of Lockbox over inhouse

Answer 4

Reduced mail time/float
improved access to remittance information
Reduced risk and improved security
Improved record keeping
Uniterupted
Scalability
Segregation of duites, auditors love them

Question 5

3 types of Lock boxes

Answer 5

Wholesale - Large payments low volume.
Retail - high volume, smaller amounts. All electronic
Hybrid - Small volume, but machine read.

Question 6

L/C

Answer 6

Letter of credit - substitutes the banks credit for that of the buyer. Eliminates the credit risk to the seller

Question 7

Commercial letter of credit

Answer 7

Or Documentary

Bank examines all documents and moves the money

Question 8

Issuing bank

Answer 8

Issues the L/C in favor of the seller

Question 9

Advising bank

Answer 9

advises the seller of an L/C in its favor

Question 10

Trade methods

Answer 10

Barter
Coutertrade
Trading companies

Question 11

Physical Pooling

Answer 11

Intercompany loans

Question 12

Notional Pooling

Answer 12

Virtual Journal entries without moving cash